Petition — Texas Employers' Insurance v. United States

ag

Upreme -

FILED

MAY 22 1978

a

MICRTAATE Jp CLERK

In The

Supreme Court

of the United States

OCTOBER TERM, 1977

TEXAS EMPLOYER’S INSURANCE ASSOCIATION,

Petitioner,

v.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI

To the United Siates Court of Appeals

For the Fifth Circuit

James H. Doores

GIBSON, OCHSNER & ADKINS

500 First National Bank Building

Amarillo, Texas 79101

Attorneys for Petitioner

SOUTHWESTERN LAW PRESS — DALLAS, TEXAS — (214) 742-3985

SUBJECT INDEX

Page

Opinions delivered in courts below ...............200000: 2

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Constitutional and statutory provisions

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Reasons for granting the writ ............ 0.00 cece eee eees 4

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Appendix

Table of Authorities

Cases: Page

Pennsylvania National Mutual Cas. Ins. Co. v. Barnett,

Sr TG SOE 6.6.6 06646 sen becevsesccccs 2,4,5

Texas Employers’ Ins. Ass'n v. United States, 390

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United States v. Bender Welding & Mach. Co.,

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United States v. Chicago White Metal Casting Company

(N. D. Ill., Eastern Div., 1974) (unreported) (App. M)..... 4

United States v. Kirkland, 405 F.Supp. 1024

DC EE Gaal éhevéceWeaddecbeceéusdaececes 4

United States v. Standard Oil Co., 332 U.S. 301 (1947) ...... 2,4

Constitution:

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Statutes:

Art. 8306, §3, Texas Revised Civil Statutes ................ 3,6

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Regulations:

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In The

Supreme Court

of the United States

OCTOBER TERM, 1977

TEXAS EMPLOYER’S INSURANCE ASSOCIATION,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI

To the United States Court of Appeals

For the Fifth Circuit

To The Honorable Warren E. Burger, Chief Justice of the

Supreme Court of the United States and The Associate

Justices of the Supreme Court of the United States:

Petitioner, TEXAS EMPLOYER'S INSURANCE ASSOCIA-

TION, prays that a writ of certiorari issue to the Court of Appeals

for the Fifth Circuit to review its decision that the United States may

recover from a workmen’s compensation carrier the cost of medical

care provided to a veteran who is also covered by a workmen's

2

compensation statute, and that on hearing, its judgment be reversed

and the trial court's judgment be affirmed.

THE OPINIONS BELOW

The district court entered a summary judgment against the

United States (Appendix A). Two unreported memoranda

opinions were filed by the court (Appendices B and C). The Court of

Appeals opinion (Appendix D) is reported at 558 F.2d 766. The case

of United States v. Bender Welding & Mach. Co., 558 F.2d 761,

was consolidated on appeal with the case at bar and the opinion

was delivered the same day (Appendix E). The opinion on

rehearing is not yet reported (Appendix F).

JURISDICTION

The date and time of entry of the judgment sought to be reviewed

is September |, 1977. Petition for Rehearing was denied on March

16, 1978. This court has jurisdiction under 28 U.S.C.A. § 1254(1).

QUESTIONS PRESENTED

|. Whether the United States may recover from a workmen's

compensation carrier the reasonable cost of medical care provided

by the Veterans Administration in the absence of legislation

authorizing such recovery.

2. Whether the decision of the Court of Appeals is in conflict

with Article |, Section | of the Constitution, the decision in United

States v. Standard Oil Co., 332 U.S. 301 (1947), or with a prior

decision by the Court of Appeals for the Fifth Circuit in

Pennsylvania National Mutual Cas. Ins. Co. v. Barnett, 445 F.2d

573 (Sth Cir. 1971).

3. Whether Congress authorized recovery of such medical

care costs in giving the Veterans Administrator rule-making

power through 38 U.S.C. §210(c) and 38 U.S.C. §621.

4. Whether the Administrator's regulation, 38 C.F.R.

3

§17.48(d), purports to create a new substantive legal liability and,

if so, whether it is within his statutory authority.

CONSTITUTIONAL AND STATUTORY

PROVISIONS AND REGULATIONS INVOLVED

U.S. CONST. art. I, § 1

“All legislative powers herein granted shall be vested

in a Congress of the United States, which shall consist

of a Senate and House of Representatives.”

38 U.S.C. § 210(c\(1); pocket part, page 23 (Appendix G)

38 U.S.C. § 610(a)(1)(B); pocket part, page 105 (Appendix H)

38 U.S.C. § 621; pocket part, page 117 (Appendix 1)

42 U.S.C. §§ 2651-53; pages 327-328 (1962) (Appendix J)

Art. 8306, § 3, Texas Revised Civil Statutes, page | | (Append-

ix K)

Regulation

38 C.F.R. § 17.48(d), pages 550-551 (Appendix L)

STATEMENT OF THE CASE

On December 23, 1973, Henry Adams, a veteran, sustained an

injury while working for Affiliated Foods, Inc., Amarillo, Texas,

which carried workmen's compensation insurance with Petitioner

under the Texas Workmen’s Compensation Act. He was admitted

to the Veterans Administration Hospital, Amarillo, Texas and

treated there. After his discharge, the Veterans Administration

sought to recover $1,989.85 as costs of medical care from Petitioner.

Petitioner refused payment and the United States, through the

Veterans Administration, filed an independent claim with the Texas

Industrial Accident Board. The Board ordered Petitioner to pay the

claim, and Petitioner filed suit in state court to set aside the Board's

award and for judgment that the United States take nothing. The

United States removed the case to federal court and filed a

counterclaim for the cost of medical care.

4

Federal jurisdiction attached under 28 U.S.C. § 1345 because,

though nominally a defendant, the United States commenced the

proceeding with the Industrial Accident Board and was in

substance the plaintiff in the case.

REASONS FOR GRANTING THE WRIT

While no statistics are available, it is a known fact that many

veterans who are injured on their jobs and are covered by

workmen's compensation are treated in Veterans Administration

hospitals. This is a matter of substantial national magnitude, and

whether the United States can recover for such medical care is an

important federal question which should be settled by this court.

Three United States district courts have allowed recovery. They

are United States v. Kirkland, 405 F.Supp. 1024 (E.D. Tenn.

1975); Pennsylvania National Mutual Cas. Ins. Co. v. Barnett,

(unreported), reversed 445 F.2d 573 (Sth Cir. 1971); and United

States v. Chicago White Metal Casting Company, (N.D. Iil.,

Eastern Div., 1974) (unreported) (Appendix M). The Fifth

Circuit in Barnett reversed the district court and denied recovery.

Recovery was also denied in Texas Employers’ Ins. Ass'n. v.

United States, 390 F.Supp. 142 (N.D. Tex. 1975).

The historical setting of this case began with United States v.

Standard Oil Co., 332 U.S. 301 (1947). The court there held that

the government could not recover medical expense or soldier's

pay from a tort feasor because Congress had created no such

remedy.

Fifteen years later, Congress enacted the Federal Medical Care

Recovery Act, 42 U.S.C. §§ 2651-53 (1962). This Act created a

right of recovery in the United States for medical care “under

circumstances creating a tort liability upon some third person...

to pay damages therefor.” The Act does not create any right to

recover under contract or workmen’s compensation statutes.

5

Congress has not expressly authorized recovery of the cost of

medical care to veterans covered by workmen's compensation

insurance. It has given the Veterans Administrator power “to

make all rules and regulations which are necessary or appropriate

to carry out the laws administered by the Veterans

Administration . . .” 38 U.S.C. §210(c). The Administrator is

also authorized to prescribe “such rules and procedures

governing the furnishing of hospital and domiciliary care as he

may deem proper and necessary” and “limitations in connection

with the furnishing of hospital and domiciliary care . . .” 38

U.S.C. § 621.

Purporting to act under authority of these statutes, the

Administrator has promulgated a regulation requiring that

patients who might be entitled to medical benefits under a

workmen’s compensation law be requested to assign those

benefits. 38 C.F.R. § 17.48(d).

In Pennsylvania National Mutual Cas. Ins. Co. v. Barnett, 445

F.2d 573 (Sth Cir. 1971), the court considered the Standard Oil

case, the Medical Care Recovery Act, and the regulation. The

facts were identical to the case at bar except that the veteran had

not executed an assignment.

The court held that the Standard Oil case applied to a

workmen’s compensation carrier as well as to a tort feasor and

pointed out that there is no federal common law which would

allow recovery and therefore only Congress could create the

right. The Medical Care Recovery Act was limited to torts. The

court did not reach the assignment regulation, since there was no

assignment, and refused to allow recovery.

The Court of Appeals in the case at bar holds that, since the

United States has an assignment from the injured workman,

neither the Standard Oil case nor the Barnett case precludes

6

recovery. The basis of the court's decision is that the assignment

subrogates the government to the workman's rights and thus no

new substantive right is created.

The decision is both factually and legally incorrect. It is also

directly contrary to the Standard Oil and the Barnett cases, which

hold that only Congress can create this kind of right of recovery.

The United States did not become a subrogee by virtue of the

assignment. In fact, the assignment was void under Texas law.

Art. 8306, §3,. Texas Revised Civil Statutes. The United States did

not file its claim as a subrogee through the assignment but as an

independent claimant, and was awarded recovery by the Texas

Industrial Accident Board as an “independent claimant”

(Appendix N).

The decision of the Court of Appeals in this case is contrary to

both the spirit and letter of the Standard Oiland Barnett cases. It

has the effect of creating a new federal right of recovery of major

national importance without legislative aid.

In fact, the decision amounts to a usurpation of the legislative

function of Congress in violation of Article I, Section | of the

United States Constitution.

This case involves a major night of recovery by the United States.

It also involves important federal questions which should be decided

by this court.

7

CONCLUSION

TEXAS EMPLOYER'S INSURANCE ASSOCIATION,

petitioner, prays that a writ of certiorari issue to review the

judgment of the United States Court of Appeals for the Fifth

Circuit in this case.

Respectfully submitted,

GIBSON, OSHSNER & ADKINS

500 First National Bank Building

Amarillo, Texas 79101

James H. Doores, of Counsel

Attorneys for Petitioner

CERTIFICATE OF SERVICE

I hereby certify that three (3) copies of the Petition for Writ of

Certioran have the day of May, 1978, been placed in

the United States mail, postage prepaid, addressed as follows:

William Kanter

Neil H. Koslowe

Department of Justice

Civil Division — Appellate Section

Washington, D.C. 20530

Solicitor General

Department of Justice

Washington, D.C. 20530

EEE EERE EERE EE EEE EEE EEE EEE EEE EEE EEE

INDEX TO APPENDIX

Page

Appendix A — Summary Judgment entered by

PR vc cccncnencneeueenusieeeisscccvcesaeed A-|

Appendix B — Memorandum Opinion, unreported ....... A-3

Appendix C — Memorandum Opinion, unreported ....... A-6

Appendix D — Court of Appeals Opinion, 558 F.2d 761... . A-9

Appendix E — United States v. Bender Welding & Mach.

lg SEN ED FE 6 65 bauncensesesseanieneeeséeseess A-14

Appendix F — Opinion on Rehearing(unreported) ...... A-23

Appendix G — 38 U.S.C. § 210(c)( 1), pocket part. page 23 . A-26

Appendix H — 38 U.S.C. § 610(a)(1)(B), pocket part,

DPUED ccc cuctevescevesscccsdesessenssvasescciel A-27

Appendix I — 38 U.S.C. §621. pocket part, page 117 ..... A-28

Appendix J — 42 U.S.C. §§ 2651-53, pages 327-328 ....... A-29

Appendix K — Art. 8306, § 3, Texas Revised Civil

INTE 96.0'060506000n666050085600000-50068 A-33

Appendix L — 38C.F.R. § 17.48(d), pages 550-551 ....... A-35

Appendix M — United States v. Chicago White Metal

Casting Company (N. D. Ill., Eastern Div., 1974)

GHESTNNE oc ccc cccccccccscecccseusevcccvcvceess A-36

Appendix N — Texas Industrial Accident

UCN vv ccccevcccnccsececessevecscecccens A-43

A-|

APPENDIX A

In The United States District Court

For The Northern District of Texas

Amanillo Division

Civil Action No. CA-2-75-61

Texas Employer's Insurance Association,

Plaintiff,

vs.

United States of America,

Defendant.

ORDER AND JUDGMENT

This cause came on to be heard on motion of Defendant for

Summary Judgment and on cross-motion of the Plaintiff for

Summary Judgment, pursuant to Rule 56 of the Federal Rules of

Civil Procedure, and the Court having considered the pleadings, the

briefs of the parties, and having heard and argument of counsel, and

due deliberation having been had thereon, it is

ORDERED that Defendant’s motion for summary judgment be

and the same hereby is denied, and it is further

ORDERED that Plaintiff's motion for summary judgment be

and the same hereby is granted, and it is further

ORDERED, ADJUDGED AND DECREED that the final

award of the Industrial Accident Board of the State of Texas in

Cause No. M-036104-N2 styled Henry H. Adams v. Affiliated

Foods, Inc., employer, and Texas Employers’ Insurance

Association, insurance carrier, insofar as such award orders

payment to the Veteran’s Administration of $1,989.85, such award

being dated March 4, 1975, be and the same hereby is in all things set

A-2

aside and held for naught. Such award is set aside only to the extent

of such payment to the Veteran’s Administration and not in the

Board approval of the compromise settlemem agreement entered

into between Henry Adams and Texas Employers’ Insurance

Association.

iT IS FURTHER ORDERED, ADJUDGED AND

DECREED that Defendant take nothing by its counterclaim and

that Plaintiff is discharged from all liability, and that Plaintiff

recover its costs.

ENTERED this 18th day of February, 1976.

/s/ Halbert O. Woodward

Halbert O. Woodward

United States District Judge

A-3

APPENDIX B

In The United States District Court

For The Northern District of Texas

Amarillo Division

Civil Action No. CA-2-75-61

Texas Employers’ Insurance Association,

Plaintiff,

vs.

United States of America,

Defendant.

MEMORANDUM

Plaintiffs originally brought this case in the 181st Judicial District

Court of Randall County, Texas, seeking to set aside the award of

the Industrial Accident Board in favor of one Henry H. Adams, an

employee of Affiliated Foods, Inc. The employer and employee

were covered by a workmen’s compensation insurance policy issued

to Affiliated Foods, Inc., as subscriber, under the Workmen's

Compensation Laws of the State of Texas. Mr. Adams sustained an

accidental injury while in the course of his employment, and after

following the correct procedures, the Industrial Accident Board

entered a final award in said cause on March 4, 1975 ordering the

Texas Employers’ Insurance Association to pay to the Veterans

Administration, an independent claimant, the total of $1,989.85.

The pleadings indicate that Mr. Adams received treatment through

the Veterans Administration Hospital at Amarillo, Texas for the

injuries sustained by him while in the course of his employment and

covered by such Workmen's Compensation insurance policy.

After removal to this court, each party filed motion for summary

A-4

judgment, and it appears to the court that there is no dispute as to

the material facts necessary to the entry of the judgment hereinafter

ordered. The fact of the injury while Mr. Adams was employed by

Affiliated Foods, Inc., the issuance of the workmen's compensation

policy by the plaintiff in this case, and the fact that Mr Adams

received treatment for such injuries at the Veterans Administration

Hospital are all undisputed. The sole and only question to be

determined is one of law and that is whether or not the United States

of America can recover for the reasonable and necessary costs of the

medical services furnished Mr. Adams under these circumstances.

This question has been answered in the negative by at least three

courts in written opinions which are controlling as to the question of

law raised here. The United States Supreme Court in United States

v. Standard Oil Company, 332 U.S. 301, 67 S.Ct. 1604, 91 L.Ed.

2067; the United States Court of Appeals for the Fifth Circuit in

Pennsylvania National Mutual Casualty Insurance Company v.

Barnett, 445 F.2d 573 (1971); and the United States District

Court for the Northern District of Texas in an opinion by Judge

Brewster in Texas Employers’ Insurance Association v. United

States of America, 390 F. Supp. 142 (1975), and each case is

authority for granting summary judgment in favor of the plaintiff

in this case. This court agrees with the ultimate decision and the

reasoning supporting such decisions, and also is bound to follow

such decisions and will, therefore, enter a summary judgment in

favor of the plaintiff.

It is realized that the Federal Rules of Civil Procedure

contemplate that a hearing may be afforded the parties before the

entry of summary judgment, but it appears to this court that the

matter has been fully briefed and argued in the submissions of the

parties. It is therefore ORDERED that the attorney for the

plaintiff prepare an appropriate summary judgment granting its

motion in connection therewith, and if the attorney for the

A-5

defendant desires a hearing, this court will be notified by

February 17, 1976 of such desire so that a hearing can be set

during that week. If no such notification is received by the court

the motion for summary judgment will be entered when

submitted by the attorney for the plaintiff.

The Clerk will furnish a copy hereof to each attorney.

ENTERED this | Ith day of February A.D. 1976.

eee ewe weeneee

SPOOR C OTS O SESS SSeS Eeesesseeeeeseoe

i

Halbert O. Woodward

United States District Judge

A-6

APPENDIX C

In The United States District Court

For The Northern District of Texas

Amarillo Division

Civil Action No. CA-2-75-61

Texas Employers’ Insurance Association,

Plaintiff,

vs.

United States of America,

Defendant.

SUPPLEMENTAL MEMORANDUM

Pursuant to a memorandum and order of this court dated

February 11, 1976, the attorney for the defendant requested that the

court hold a hearing on the motions for summary judgment. Such

hearing was held in Amarillo, Texas on February 17, 1976 with

attorneys for both parties present.

At such hearing, the attorney for the government urges the court

to enter judgment in its favor because 38 C.F.R. § 17.48(d), which

is a regulation promulgated by the Veterans Administration,

provides for recovery by the Veterans Administration for

hospital and medical services furnished by it to a veteran who is

covered by workmen’s compensation benefits, such recoverage to

be from the workmen's compensation insurance carrier.

Additionally, the government argues that zecovery should be

allowed and permitted in this case because the government is a

third party beneficiary to the workmen's compensation insurance

policy.

The court is of the opinion that its original memorandum of

A-7

February 11, 1976 correctly sets forth the applicable law and

supports a summary judgment in favor of the plaintiff, Texas

Employers’ Insurance Association.

Judge Brewster, in Texas Employers’ Insurance Association v.

United States of America, 390 F.Supp. 142(N.D. Tex. 1975), has

answered this contention in detail. His judgment and opinion in

that case clearly holds that only the Congress has the authority to

create a new substantive legal liability or right. The Congress has

not so provided in the case of workmen's compensation benefits

and policies as it has done in those instances where the victim is

injured as a result of a tort committed by a government employee.

See 42 U.S.C. § 2651(a) — which statute does not apply to

workmen's compensation claims. The requirement of

Congressional action to authorize the government to recover for

medical benefits furnished an injurd employee covered by

workmen's compensation is exactly the same as it was in tort

actions prior to the enactment of 42 U.S.C. § 265I(a) in 1962.

United States v. Standard Oil Company, 332 U.S. 301, 67 S.Ct

1604, 91 L.Ed. 2067. |

Further, the government has no more right to recover for the

value of the hospital expenses it furnished to an injured

employee, formerly a veteran, under the theory that it is a third

party ber-ficiary than it would have the right to recover under

the ab regulation of the Veterans Administration. Here,

again, the Congress has not acted to create this substantive legal

right of recovery in the government. The holding of United States

v. Standard Oil Company, supra, and Texas Employers’

Insurance Association v. United States of America, supra, and

the reasoning of these decisions prevent the government's

recovery on a third party beneficiary theory.

A-8

Accordingly, a summary judgment will be entered on behalf of

the plaintiff, Texas Employers’ Insurance Association.

The Clerk will furnish a copy hereof to each attorney.

ENTERED this |8th day of February A.D. 1976.

/s/ Halbert O. Woodward

eel

Halbert O. Woodward

United States District Judge

A-9

APPENDIX D

Texas Employers’ Insurance Association,

Plaintiff- Appellee,

v.

United States of America,

Defendant- Appellant.

No. 76-2056.

United States Court of Appeals,

Fifth Circuit.

Sept. 1, 1977.

Appeal from the United States District Court for the Northern

District of Texas.

Before WISDOM, CLARK and RONEY, Circuit Judges.

RONEY, Circuit Judge:

This case presents the sole question of whether the United States

can recover the cost of medical services provided through a Veterans

Administration hospital to an injured veteran-employee covered by

the Texas Workmen’s Compensation Act, Texas

Rev.Civ.Stat.Ann. arts. 8306-8309 (Vernon 1967). The legal issue is

a variation of that decided in favor of the Government in United

States v. Bender Welding & Machine Co., —.— F.2d

Docket No.s 76-1770 and 76-1916, with which this case was

consolidated. In those cases the employees were covered by the

federal Longshoremen’s compensation act, here by a state

compensation act. The result, rationale, and holding of the cases

are the same. We treat this case separately only to more easily

discuss the issue in the state compensation act context. Here the

A-10

state board directed the compensation carrier to pay the cost of

medical care provided by the V.A. hospital. The district court set

aside that part of the award. We reverse the district court.

Adams, a veteran, was injured in the course of hisemployment

with Affiliated Foods, Inc., a company subject to the Texas

Workmen's Compensation Act. He was admitted to the Veterans

Administration hospital, but transferred immediately to a

private hospital for surgery. A few days later he returned to the

V.A. hospital where he remained until his discharge two weeks

later.

Adams had been admitted to the V.A. hospital only after the

Veterans Administration had determined, in accordance with

U.S.C.A. § 610(a)(1)(B), that he was a veteran with a non-service-

connected disability, and was “unable to defray the expenses of

necessary hospital care.”'! Subsequent to his release, Adams filed

a claim for state workmen’s compensation. The Veterans

Administration then obtained an assignment of all workmen’s

compensation claims that he might have for medical services

rendered by the Veterans Administration, and billed him for the

cost of these services.

The Texas Industrial Accident Board approved a

“compromise settlement” between Adams and Texas Employers’

Insurance Association, which included “all accrued hospital and

| Until amendment in 1976, the Veterans’ Benefit Act provided in pertinent part:

(a) The Administrator, within the limits of Veterans’ Administration facili-

ties, may furnish hospital care or nursing home care which he determines is

needed to—

(1) ed

(B) any veteran for a non-service-connected disability if he is unable to

defray the expenses of necessary hospital or nursing home care.

Veterans’ Benefits Act of 1957 , P.L. 85-56, § 510, 71 Stat. 111, as amended

P.L. 85-857, 72 Stat. 1141 (1958); P.L. 87-583, 76 Stat. 381 (1962); P.L. 89-

358, § 8, 80 Stat. 27 (1966); P.L. 93-82, § 102, 87 Stat. 180 (1973). See also

38 C_F.R. § 17.47 (1976). Congress in 1976 eliminated the male pronouns and

substituted gender-neutral terms. 38 U.S.C. § 610 (Supp. 1977).

A-I1

medical expenses resulting from [Adams’] injury — no

exception.” The carrier paid the private hospital bill but refused

to pay the Veterans Administrations’ claim. The Board then

ordered payment. On the carrier's petition for review, removed

by the Government from the state court, the district court entered

judgment for the carrier. The Government's appeal to this Court

ensued.

The Texas Workmen's Compensation Act, Tex.Rev.Civ.Stat.

Ann. art. 8306, § 7 (Vernon Supp. 1976-1977),? provides that an

employee shall have the sole right to select or choose the persons

or facilities to furnish medical aid, chiropractic services, hospital

services, and nursing in connection with a job-related injury

covered by the Act, “and the Association shall be obligated for

same.” The clear import of the statute is that the employer shall

be liable to the employee for medical expenses incurred in the

treatment of a compensable injury. There is no question in the

instant case regarding the Act’s coverage of the injury in

question. Nor is there any question as to the private hospital’s

entitlement to the costs incurred for surgery and treatment. The

Texas courts, discussing the predecessor statute, have held thata

private physician and hospital that render medical services to an

injured employee have a right to recover the costs incurred from

the compensation carrier. Maryland Casualty Co. v. Hendrick

Memorial Hospital, 169 S.W. 2d 965 (Tex.Civ.App. — Eastland

1942), affd, 141 Tex. 23, 169 S.W.2d 969 (1943); Texas

Employers’ Insurance Ass'n v. Herron, 29 S.W.2d 524 (Tex.Civ.

App. — Waco 1930), writ dismissed).

? Tex.Rev.Civ. Stat.Ann. art. 8306, § 7 (Vernon Supp. 1976-77) provides:

The employee shall have the sole right to select or choose the persons or

facilities to furnish medica! aid, chiropractic services, hospital services, and

nursing and the association shall be obligated for same or, alternatively, at

the employee's option, the association shall furnish such medical and .. .

as may be reasonably required at the time of the injury and at any time there-

after to cure and relieve from the effects naturally resulting from the injury.

A-12

The only questions presented here are whether the employ ce

can recover the cost of medical care that would have been

furnished free by the V.A. hospital, but for the compensation

coverage; and, if so, whether the Government is entitled to

subrogation to the employee's rights, having taken an assignemnt

pursuant to 38 C.F.R. § 17.48/d) (1976). Based on the general

purpose of the Texas Workmen’s Compensation Act, which is

not unlike the purpose of the federal Longshoremen’s

Compensation Act, and on our opinion in United States v.

Bender Welding & Machine Co., —— F.2d Docket Nos.

76-1770, 76-1916, decided with this case, we hold that the

Government should be reimbursed by the compensation carrier

for the medical expenses incurred.

[1] Motivating the enactment of the Texas Workmen’s

Compensation Act was the broad economic theory that

industrial accident costs should be chargeable to the industries as

part of their overhead expenses. Southern Surety Co. v. Inabnit,

| S.W.2d 412 (Tex.Civ.App. — Eastland 1927, no writ);

Emplovers Mutual Liability Insurance Co. v. Konvicka, 197

F.2d 691 (Sth Cir. 1952). The Texas courts have consistently held

' 38 C.F.R. § 17.48(d) (1976) provides in part:

(d) Persons hospitalized pursuant to paragraph . ..(d)... of § 17.47, whoit

is believed may be entitled to hospital care or medical or surgical treatment or

to reimbursement for all or part of the cost thereof by reason of any one or

more of the following:

(1)... (iii) “Workmen's Compensation” or “employer's liability” statutes,

State or Federal; . . . or

(2) By reason of statutory or other relationships with taird parties, including

those liable for damages because of negligence or other legal wrong; will not

be furnished hospital care, medical or surgical treatment, without charge

therefor to the extent of the amount for which such parties, referred to in

paragraph (dX!) .. . of this section, are, or will become liable. Such patients

will be requested to execute an appropriate assignment as prescribed in this

paragraph. Patients who, it is believed, may be entitled to care under any

one of the plans in paragraph (d\1) of this section, will be sequested to

execute VA Form 10-2381, Power of Attorney and Agreement. .. . Notice of

this assignment will be mailed promptly to the party or parties believed to be

liable. When the amount of charges is ascertained, bill therefor will be mailed

to such party or parties.

A-13

that the compensation laws should be liberally construed to

further the remedial purposes for which they were enacted.

Travelers Insurance Co. v. Adams, 407 S.W.2d 282 (Tex. Civ.

App. — Texarkana 1966, writ refd n-r.e.).

[2] The Veterans’ Benefits Act, on the other hand. was

intended to authorize free hospital care for non-service-

connected injuries only to those veterans unable to defray the

necessary medical costs. The Act was not intended to relieve an

employer of his statutory duty of compensating an injured

employee for the expenses incured in the treatment of a job-

related injury.

[3] Effectuation of the purposes of both statutes requires a

holding that the injured employee should be able to recover from

the compensation carrier the costs of medical care furnished by

the Veterans Administration. A contrary holding would be a

windfall to the insurance carrier merely because the employee

was a veteran able to obtain care at a V.A. hospital, and would be

inconsistent with the right of recovery afforded a private

hospital. No valid reason appears for drawing a distinction

between the two, where the employee has been billed. Nor does a

valid reason appear for burdening the Government with the costs

of a job-related injury, which should more appropriately be

borne by the employer.

REVERSED.

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APPENDIX E

The UNITED STATES of America, the Veterans

Administration and Director, Office of Workmen’s

Compensation Programs, United States Dept. of Labor,

Petitioners,

Vv.

BENDER WELDING & MACHINE CO.

and American Mutual Liability Insurance Co.,

Respondents.

The UNITED STATES OF AMERICA, the Veterans Admini-

stration and Director, Office of Workmen’s Compensation

Programs, United States Department of Labor,

Petitioners,

V.

BENDER WELDING & MACHINE CO.

and American Mutual Liability Insurance Co.,

Respondents.

No. 76-1770, 76-1916.

United States Court of Appeals,

Fifth Circuit.

Sept. 1, 1977.

Petitions for Review of Orders of the Benefits Review Board,

Department of Labor (Alabama Cases).

Before WISDOM, CLARK and RONEY, Circuit Judges.

RONEY, Circuit Judge:

These two consolidated cases present the common legal question

A-15

of whether the United States can recover the cost of medical care

provided through a Veterans Administration hospital to disabled or

injured veteran-employees covered by the Longshoremen’s and

Harbor Workers’ Act, 33 U.S.C.A. § 901 et seg. The Benefits

Review Board denied recovery. We reverse on the ground that

the Government, to which the employees had voluntarily

assigned their compensation claims, was by subrogation entitled

to reimbursement for the expense of medical services furnished

the employees.

The facts of the two cases are similar. In both cases, veteran-

employees, who worked as sandblasters for respondent Bender

Welding & Machine Company, a maritime employer subject to

the Longshoremen’s and Harbor Workers’ Compensation Act,

were hospitalized in V.A. hospitals for treatment of job-related

non-service-connected disabilities. Both signed statements prior

to admission verifying that they were veterans and were “unable

to defray the expenses of necessary hospital care.”' Upon

subsequent discovery of each employee’s eligibility for compen-

sation benefits, the hospital billed the employees for the cost of

medical care, and took from both assignments of their medical

expense recovery rights under the Longshoremen’s and Harbor

Workers’ Compensation Act.?

' Until amendment in 1976, the Veterans’ Benefits Act provided in pertinent part:

(a) The Administrator, within the limits of Veterans’ Administration facilities,

may furnish hospital care or nursing home care which he determines is needed to

(iy***

(B) any veteran for a non-service-connected disability if [he] is unable to

defray the expenses of necessary hospital or nursing home care.

Veterans’ Benefits Act of 1957, P.L. 85-56, § 510, 71 Stat. 111, as amended P.L.

85-857, 72 Stat. 1141 (1958); P.L. 87-583, 76 Stat. 381 (1962); P.L. 89-358,

§ 8, 80 Stat. 27 (1966); P.L. 93-82, § 102, 87 Stat. 180 (1973). See also 38

C.F.R. § 17.47 (1976). Congress in 1976 eliminated the male pronouns and

substituted gender-neutral terms. 38 U.S.C.A. § 610 (Supp. 1977).

2 The assignment, VA Form 10-2381, provided in part:

For a valuabie consideration I hereby assign to the Administrator of Veter-

ans Affairs and his successors in such Office, to the extent herein indicated,

all claims, demands, entitlements, judgments, administrative awards, and

the proceeds thereof, and all causes of action which I now have, and which |

A-16

It is undisputed that the Longshoremen’s Act imposes a duty

upon the employer to pay the reasonable cost of medical care

furnished to the employees for these job-related disabilities or

injuries. 33 U.S.C.A. § 901(a), 907(a). Had the medical care

been furnished by non-Veterans Administration hospitals, there

would presumably be no resistance to payment therefor by the

employers or their insurance carriers. Recovery was denied

simply because the expenses would have been paid to the

Veterans Administration, which provided the care that would

have otherwise been provided by “compensable” hospitals.

The fundamental point which controls this decision is whether

Congress, in establishing the criteria for veterans’ hospital care

by the Government, has authorized the Veterans Administration

to recover for such services from a workmen’s compensation

carrier. Although no legislation specifically answers this

question, an appropriate understanding of the Veterans’ Benefit

Act as juxtaposed against the purpose and provisions of the

Longshoremen’s and Harbor Workers’ Compensation Act leads

to the conclusion that recovery is authorized. The key to the

decision is an appreciation of the fact that the Veterans

Administration is not required to provide free medical care toa

may have hereafter, by reason of any liability of third parties entitling me to

hospital care, or medical or surgical treatment, or to reimbursement for all

or part of the cost of any such; or recovery of damages for all or part thereof:

(a) based on contract, partially enumerated here as (1) membership in a

union, fraternal or other organization, (2) rights, under a group hospitali-

zation plan or u‘.der any insurance contract or plan which provides for

payment or reimbursement for the cost of medical or hospital care.

(b) based on staiute, State or Federal (other than P.L. 87-693, 76 Stat.

593), and regulations promulgated pursuant thereto, partially enumerated

here as (1) “workmen's compensation” statutes; (2) “employer's liability”

Statuies; (3) right to “maintenance and cure™ in admurality.

The extent of this assignment is an amount equal to the total reasonable

charges for hospital care, medical, surgical, and clinical treatment, or any of

them, including ambulance transportation and other auxiliary services

received by me. This assignment does not include any sums to which | am

entitled on a fixed basis which do not depend upon the amount incurred or

disbursed by me for such care; (sometimes referred to in the insurance

business as a right to indemnity).

— Se,

-

A-17

veteran unless “[he] is unable to defray the expenses of necessary

hospital care.” If compensation coverage is treated as giving an

employee the ability to defray expenses, it necessarily follows

that medical services need not have been rendered by the

Government without charge. If the services provided by the

Veterans Hospital are not free, they would become a proper

obligation of the compensation carrier to the employee.

[1,2] The Longshoremen’s and Harbor Workers’

Compensation Act has as its general purpose the distribution of

economic loss sustained by employees and their dependents as a

result of personal injuries incurred in the course of employment

to the industries and ultimately to the consuming public served

by such employees. West Penn Sand & Gravel Co. v. Norton, 95

F.2d 498 (3d Cir. 1938). See also H.R. Rep. No. 1441, 92d Cong.,

2d Sess., reprinted in [1972] U.S. Code Cong. & Admin. News,

pp. 4698, 4699. Although the compensation carrier would not be

liable for any free services rendered the employee, it must pay for

services which were not free.

[3] The relevant Veterans’ Benefits Act authorizes the

Veterans Administration to provide hospital care to “any veteran

for non-service-connected disability if [he] is unable to defray the

expenses of necessary hospital or nursing home care.” Veterans

Health Care Expansion Act of 1973, P.L. 93-82, § 102, 87 Stat.

179 (current version at 38 U.S.C.A. § 610(a)(1)(B) (Supp. 1977)).

Pursuant to the Veterans’ Benefits Act of 1957, P.L. 85-56, § 521,

71 Stat. 113 (current version at 38 U.S.C.A. § 621 (Supp. 1977)),

the Administrator has promulgated regulations which state that

persons admitted toa V.A. hospital on this basis, who are entitled

to reimbursement for medical care by reason of a state or federal

workmen’s compensation statute, will not be furnished medical

care without charge to the extent that they are entitled to

A-18

reimbursement. 38 C.F.R. § 17.48(d)(1976).) The Act fulfills a

congressional purpose of providing free hospital services to

veterans who have suffered non-service-connected disabilities

and who are unable to pay for hospital care, in consideration for

their prior service to their country. To include veterans legally

entitled to the provisions of hospital care by third parties would

be inconsistent with Congress’ exclusion of those veterans who

would ctherwise be able to “defray the expense” of hospital

care.

[4] Nothing in the Veterans’ Benefits Act indicates that

Congress intended to relieve an employer of his statutory

responsibility for providing medical treatment to his injured

employees. See Marshall v. Rebert's Poultry Ranch & Egg Sales,

268 N.C. 233, 150 S.E.2d 423 (1966). The wisdom of this plan is

apparent. To allow a compensation carrier to escape liability

merely because the injured employee was a veteran treated ata

V.A. hospital, rather than a private hospital, would be a windfall

to the carrier, which has been paid a premium by the employer to

cover this employee. The V.A. hospital has incurred expenses in

treating the employee whom it was not obligated to treat, and

; F.R. § 17.48(d) (1976) provides in part: .

"a fd, he soopialion’ pursuant to paragraph ...(d)... of § 17.47, who it

is believed may be entitled to hospital care or medica! or surgical treatment

or to reimbursement for all or part of the cost thereof by reason of any one or

more of the following: oe iaeiiath dine

(1). . . (iii) “Workmen's Compensation” or “employer's y "

State or Federal; . . . or ear: ; ats

(2) By reason of statutory or other relationships with third parties, a

those liable for damages because of negligence or other legal wrong, ,-

be furnished hospital care, medical or surgical treatment, without rge

therefor to the extent of the amount for which such parties, referred to in

paragraph (d\1) . . . of this section, are, or will become lable. Such —

will be requested to execute an appropriate assignment as prescribed in this

paragraph. Patients who, it is believed, may be entitled to care under any one

of the plans in paragraph (dX!) of this section, will be requested ——

VA Form 10-2381, Power of Attorney and Agreement. . . . et ay

assignment will be mailed promptly to the party or parties believed ote

liable. When the amount of charges is ascertained, bill therefor will be mai

such party or parties.

A-19

should not have to absorb the cost. Charging a veteran for the

medical care costs that he is entitled to receive from a workmen's

compensation carrier violates the purpose of neither statute.

[5] Where the Veterans Administration has taken a voluntary

assignment of a veteran-employee’s compensation claim, as

prescribed by the regulations, 38 C.F.R. § 17.48, it is entitled to

recover the medical care cost as a subrogee of the employee's

rights.

This holding is consistent with this Court's decision in Pennsy!-

vania National Mut. Cas. Ins. Co. v. Barnett, 445 F.2d 573 (Sth

Cir. 1971). There we sustained the workmen's compensation

insurance carrier's position that the V.A. hospital’s recovery for

medical treatment rendered an injured employee was, by

regulation, conditioned upon the procurement of an assignment.

Although we need not address the third-party beneficiary

claims of the Government, we note the analogy between this

decision and the third-party beneficiary cases in which the

Government has been allowed reimbursement from a liability

insurer for the cost of medical care provided to an injured

veteran. See., e.g., United States v. Automobile Club Ins. Co..

522 F.2d 1 (Sth Cir. 1975); United States v. United Services

Automobile Ass'n, 431 F.2d 735 (Sth Cir. 1970); United States

v. Government Employees Ins. Co., 461 F.2d 58 (4th Cir. 1972);

United States v. State Farm Mutual Automobile Ins. Co., 455

F.2d 789 (10th Cir. 1972).

[6] United States v. Standard Oil of California, 322 U.S. 301,

67 S.Ct. 1604, 91 L.Ed. 2067 (1947), was not a subrogation case,

and reliance on the denial of recovery to the Government in that

case is misplaced. In Standard Oil the Supreme Court held that,

in the absence of legislation providing a right of recovery, the

Government could not recover from a tort-feasor amounts

A-20

expended for an injured soldier's hospitalization and for his

compensation paid during disability. The injured soldier had

previously accepted payment from the tort-feasor’s insurer and

executed a release. The case dealt only with the Government's

independent right of recovery against the tort-feasor. The court

noted exoressly

[t]he Government's claim, of course, is not one for subroga-

tion. It is rather for an independent liability owing directly

to itself as fer deprivation of the soldier’s services and

“indemnity” for losses caused in discharging its duty to care

for him consequent upon the injuries inflicted by appellants.

_.. It is, in effect, for tortious interference by a third person

with the relation between the Government and the soldier and

consequent harm to the Government's interest, rights and

obligations in that relation, not simply to subrogation to the

soldier's rights against the tort-feasors.

332 US. at 304, n. 5, 67 S.Ct. at 1606 (citation omitted). Here the

Government seeks no independent right of recovery, but only

subrogation through voluntary assignments to the rights of the

injured veteran-employees. There is no chance of double liability,

as was the case in Standard Oil. The assignments operate to di-

vest the veteran-employees of any rights they might have for the

hospital cost and medical care. See United States v. Kirkland,

405 F.Supp. 1024 (E.D. Tenn., 19760. Standard Oil does not pre-

clude the Government's subrogation to a veteran-employee’s

rights for workmen’s compensation.‘

+ It is noted that Congress responded to Standard Oil by enacting the Medical

Care Recovery Act, 42 U.s.C.A. § 2651. See S.Rep. No. 1945, 87th Cong., 2d

Sess., reprinted in [1962] U.S.Code Cong. & Ad. News, 2637, 2637-39. That

Act allows the United States to recover from a tort-feasor the reasonable

value of care furnished to an injured soldier or veteran. The statute further

provides that the Government shall be subrogated to any right or claim that

the individual shall have against the tort-feasor to the extent of that right or

claim. Although the statute is limited in operation to tort claims, See Pennsy!-

vania National Ins. Co. v. Barnett, 445 F.2d 573 (Sth Cir. 1971), and is inap-

A-21

(7] In both of these cases, defendants seek to dismiss the

petitions for review on the ground that the Government was nota

proper party to seek review of the Board's decision because it did

not participate in the proceedings before the Administrative Law

Judge or the Benefits Review Board.

The Longshoremen’s and Harbor Workers’ Compensation

Act, 33 U.S.C.A. § 921(c) (Supp. 1977), provides that “[a}ny

person adversely affected or aggrieved by a final order of the

Board may obtain a review of that order in the United States

Court of Appeals for the circuit in which the injury occurred. . .”

The statute speaks not in terms of “parties” but in terms of

“person{s] adversely affected or aggrieved.” The Government

was aggrieved by the Board’s ruling which expressly held that

neither the employee nor the Veterans Administration was

permitted to recover the costs of care furnished by the V.A.

hospital. With respect to the employee's claim for costs incurred

at the V.A. hospital, the Government was in fact the real party in

interest. The claimant himself had nothing to gain or lose by the

Board’s decision as to these costs, for he was required to pay the

Veterans Administration only to the extent he was entitled to

reimbursement by reason of workmen's compensation. 38

C.F.R. § 17.48(d) (1976). Only the Veterans Administration and

the compensation carrier were affected by the decision. This is

unlike a situation where an employee incurred costs for which he

plicable to the instant case it does indicate a congressional! poli i

. policy favoring

recovery by the Government through subrogation to the rights of the injures

person in damages for the care and treatment furnished. /d. at 2640-2641. In

egg te = ens to ? a of the House Committee on the Judiciary

inistrator eterans Affai

ecistasions ffairs commended on this proposed

. More uniform recogniti ,

Id. at 2651. ion by the courts of our right of action . . .

A-22

would be liable to the hospital whether or not he could recover

from the compensation carrier. Under these circumstances, the

Government was a “person adversely affected or aggrieved” by

the Boara’s order and has standing to petition for review in this

Court. The motion to dismiss is therefore denied.

The judgments of the Benefits Review Board are reversed, and

the cases are remanded for entry of awards in favor of the

Government.

REVERSED AND REMANDED.

A-23

APPENDIX F

Texas Employers’ Insurance Association.

Plaintiff- Appellee,

v.

United States of America,

Defendant- Appellant.

No. 76-2056.

United States Court of Appeals,

Fifth Circuit.

March 16, 1978.

Appeal from the United States District Court for the Northern

District of Texas.

ON PETITION FOR REHEARING

Before WISDOM, CLARK and RONEY, Circuit Judges.

RONEY, Circuit Judge:

[1,2] The panel held that the United States can recover from the

Texas Employers’ Insurance Association the cost of medical

services provided through a Veterans Administration hospital to an

injured veteran-employee covered by the Texas Workmen's

Compensation Act, Texas Rev.Civ.Stat.Ann. arts. 8306-8309

(Vernon 1967). A companion case, United States v. Bender

Welding & Machine Co., 558 F.2d 761 (Sth Cir. 1977), allowed a

similar recovery against an employer under the federal

Longshoremen’s and Harbor Workers’ Compensation Act, 33

U.S.C.A. § 901 ef seq.

Explicitly in Bender, and implicitly in this case, we relied on the

A-24

employee's assignment to the Veterans Administration of his

rights against the compensation carrier. See 558 F.2d at 764-765 .

A Veterans Administration regulation, 38 C.F.R. § 17.48(d)

(1976), expressly authorizes the assignment. The Association

argues that Texas Rev. Civ. Stat. art. 8306, § 3 (Vernon 1967)

makes such an assignment void. See Texas Employers’ Insurance

Association v. United States, 390 F.Supp. 142, 149-150 (N.D.

Texas 1975), Lively v. Blue Cross Hospital Service, Inc., 488

S.W. 2d 474 (Tex.Civ.App. 1972) (no writ).

State law, however, does not control this case. The Veterans

Administration promulgated § 17.48(d) under its statutory

rulemaking power, 38 U.S.C.A. §§ 210(c), 621. The regulation

has the force of federal law. Under the Supremacy Clause of the

Constitution, Art. VI, cl. 2, a state may not condition a

workmen's compensation scheme in a manner which frustrates

the purpose of a national statute. Nash v. Florida Industrial

Commission, 389 U.S. 235, 88 S.Ct. 362, 19 L.Ed.2d 438 (1967)

(denial of benefits for filing unfair labor practice charge conflicts

with National Labor Relations Act).

Application of the federal regulation here is but a minor

trespass on the state scheme. See United States v. Kirkland, 405

F.Supp. 1024, 1030 (E.D. Tenn. 1975). The purpose of

prohibiting assignments is to protect employees against the

improvident distribution of benefits meant to sustain them

during their period of disability and to protect them against old

creditors’ claims. This assignment does not apply to any

compensation benefits except those based on the reasonable

charges for health care incurred. It operates to the benefit of the

injured worker because it allows the Veterans Administration to

give treatment first and worry later about whether the worker

was entitled to free care because of inability to defray the costs, 38

U.S.C.A. § 610.

C8 ee OR Kee “

ee ee eae

ee <

AO a Et en mee ont

A-25

Also, the assignee here is the Government, not a private party.

A recognized maxim of statutory construction is that “{a] gen-

eral statute imposing restrictions does not impose them upon the

Government itself without a clear expression or implication to

that effect.” United States v. Wittek. 337 U.S. 346, 358-359, 69

S.Ct. 1108, 1114, 93 L.Ed. 1406 (1949): see Hancock y. Train, 426

U.S. 167, 96 S.Ct. 2006, 48 L.Ed.2d 555 (1976). In the federal

context, this maxim explains why the anti-assignment provision

in the Longshoremen’s Act, 33 U.S.C.A. § 916, does not bar

application of § 17.48(d). Several state courts have reached a

similar conclusion in construing state anti-assignment laws.

Annot., 31 A.L.R. 3d 532, 544 (collecting cases).

PETITION DENIED.

A-26

APPENDIX G

VETERANS’ BENEFITS 38 § 210

[See main volume for text of (b)]

(c) (1) The Administrator has authority to make all rules

and regulations which are necessary or appropriate to carry out

the laws administered by the Veterans’ Administration and are

consistent therewith, including regulations with respect to the

nature and extent of. proofs and evidence and the method of

taking and furnishing them in order to establish the right to

benefits under such laws, the forms of application by claimants

under such laws, the methods of making investigations and

medical examinations, and the manner and form of

adjudications and awards.

oe

ee ne

ee Pak ee

A-27

APPENDIX H

VETERANS’ BENEFITS 38 § 610

SUBCHAPTER II — HOSPITAL, NURSING HOME, OR

DOMICILIARY CARE AND MEDICAL TREATMENT

§ 610. Eligibility for hospital, nursing home, and domiciliary care

(a) The Administrator, within the limits of Veterans’

Administration facilities, may furnish hospital care or nursing

home care which the Administrator determines is needed to—

(B) any veteran for a non-service-connected disability if such

veteran is unable to defray the expenses of necessary hospital or

nursing home care;

A-28

APPENDIX I

VETERANS’ BENEFITS 38 § 622

SUBCHAPTER III — MISCELLANEOUS PROVISIONS

RELATING TO HOSPITAL AND NURSING HOME CARE

AND MEDICAL TREATMENT OF VETERANS

§ 621. Power to make rules and regulations

The Administrator shall prescribe—

(1) such rules and procedure governing the furnishing of

hospital, nursing home, and domiciliary care as the

Administrator may deem proper and necessary;

(2) limitations in connection with the furnishing of hospital,

nursing home and domiciliary care; and

(3) such rules and regulations as the Administrator deems

necessary in order to promote good conduct on the part of

persons who are receiving hospital, nursing home, or

domiciliary care in Veterans’ Administration facilities.

A-29

APPENDIX J

CHAPTER 32.—THIRD PARTY LIABILITY FOR

HOSPITAL AND MEDICAL CARE

Sec.

2651. Recovery by United States. .

(a) Conditions; exceptions; persons liable; amount of recovery:

subrogation; assignment.

(b) Enforcement procedure; intervention; joinder of parties;

State or Federal court proceedings.

(c) Veterans’ exception.

2652. Regulations.

(a) Determination and establishment of reasonable value of care

and treatment.

(b) Settlement, release and waiver of claims.

(c) Damages recoverable for personal injury unaffected.

2653. Limitation or repeal of other provisions for recovery of

hospital and medical care costs.

§ 2651. Recovery by United States — Conditions, exceptions;

persons liable; amount of recovery; subrogation; assignment.

(a) In any case in which the United States is authorized or

required by law to furnish hospital, medical, surgical or dental

care and treatment (including prostheses and medical appliances)

to a person who is injured or suffers a disease, after the effective

date of this Act, under circumstances creating a tort liability

upon some third person (other than or in addition to the United

States and except employers of seamen treted under the

provisions of section 249 of this title) to pay damages therefor,

the United States shall have the right to recover from said third

person the reasonable value of the care and treatment so

——

A-30

furnished or to be furnished and shall, as to this right be

subrogated to any right or claim that the injured or diseased

person, his guardian, personal representative, estate, dependents,

or survivors has against such third person to the extent of the

reasonable value of the care and treatment so furnished or to be

furnished. The head of the department or agency of the United

States furnishing such care or treatment may also require the

injured or diseased person, his guardian, personal representative,

estate, dependents or survivors, as appropriate, to assign his

claim or cause of action against the third person to the extent of

that right or claim.

Enforcement procedure; intervention; joinder of parties;

State or Federal court proceedings

(b) The United States may, to enforce such right, (1) intervene

or join in any action or proceeding brought by the injured or

diseased person, his guardian, personal representative, estate,

dependents, or survivors, against the third person who is liabie

for the injury or disease; or (2) if such action or proceeding is not

commenced within six months after the first day in which care

and treatment is furnished by the United States in connection

with the injury or disease involved, institute and prosecute legal

proceedings against the third person who is liable for the injury or

disease. in a State or Federal court, either alone (in its own name

or in the name of the injured person, his guardian, personal

representative, estate, dependents or survivors) or in conjunction

with the injured or diseased person, his guardian, personal

representative, estate, dependents or survivors.

Veterans’ exception

(c) The provisions of this section shall not apply with respect

to hospital, medical, surgical or dental care and treatment

(including prostheses and medical appliances) furnished by the

A-31

Veterans’ Administration to an eligible veteran for a service-

rn disability under the provisions of chapter 17 of Title

§ 2652. Regulations — Determination and establishment of

reasonable value of care and treatment

(a) The President may prescribe regulations to Carry out this

chapter, including regulations with respect to the determination

and establishment of the reasonable value of the hospital

medical, surgical, or dental care and treatment (including aree-

theses and medical appliances) furnished or to be furnished.

Settlement, release and waiver of claims

(b) To the extent prescribed by regulations under subsection

(a) of this section, the head of the department or agency of the

United States concerned may (1) compromise, or settle and

execute a release of, any claim which the United States has by

virtue of the right established by section 2651 of this title; or (2)

waive any such claim, in whole or in part, for the convenience of

the Government, or if he determines that collection would result

in undue hardship upon the person who suffered the injury or

disease resulting in care or treatment described in section 2651 of

this title.

Damages recoverable for personal injury unaffected

(c) No action taken by the United States in connection with

the rights afforded under this legislation shall operate to deny to

the injured person the recovery for that portion of his damage not

covered hereunder.

Pub.L. 87-693, § 2, Sept. 25, 1962, 76 Stat. 593.

§ 2653. Limitation or repeal of other provisions for recovery

of hospital and medical care costs

A-32

I his chapter does not limit or repeal any other provision of law

providing for recovery by the United States of the cost of care and

treatment described in section 2651 of this title.

Pub.1.. 87-693, § 3, Sept. 25, 1972. 76 Stat. 594.

A-33

APPENDIX K

Art. 8306, sec. 3. Exclusiveness of remedy; exception of

compensation from legal process; assignability; recovery from third

persons; liability of subscriber

Sec. 3. The employees of a subscriber and the parents of minor

employees shall have no right of action against their employer or

against any agent, servant or employee of said employer for

damages for personal injuries, and the representatives and

beneficiaries of deceased employees shall have no right of action

against such subscribing employer or his agent, servant or

employee anc their representatives and beneficiaries shall look for

compensation solely to the association, as the same is hereinafter

provided for. All compensation allowed under the succeeding

sections herein shall be exempt from garnishment, attachment,

judgment and all other suits or claims, and no such right of action

and no such compensation and no part thereof or of either shall be

assignable, except as otherwise herein provided, and any attempt to

assign the same shall be void. If an action for damages or account of

injury to or death of an employee of a subscriber is brought by such

employee, or by the representatives or beneficiaries of such deceased

employee, or by the association for the joint use and benefit of itself

and such employee or such representatives or beneficiaries, against a

person other than the subscriber, as provided in Section 6a, Article

8307, Revised Civil Statutes of Texas, 1925, and if such action

results in a judgment against such other person, or results in a

settlement by such other person, the subscriber, his agent, servant or

employee, shall have no liability to reimburse or hold such other

person harmless on such judgment or settlement, nor shall the

subscriber, his agent, servant or employee, have any tort or contact

liability for damages to such other person because of such judgment

or settlement, in the absence of a written agreement expressly

A-34

assuming such liability, executed by the subscriber prior to such

injury or death. No part of this Section is intended to lessen or alter

the employees existing rights or cause of action either against his

employer, its subscriber or any third party.

The Association, its agent, servant or employee, shall have no

liability with respect to any accident based on the allegation that

such accident was caused or could have been prevented by a

program, inspection, or other activity or service undertaken by the

association for the prevention of accidents in connection with

operations of its subscriber; provided, however, this immunity shall

not affect the liability of the association for compensation or as

otherwise provided in this law. No part of this Section is intended to

lessen or alter the employees existing rights or cause of action either

against his employer, its subscriber, or any third party. Acts 1917, p.

269: Acts 1923, p. 385; Acts 1963, 58th Leg., p. 1132, ch. 437, § I.

Complete Text of Article 8306, see pp. 10-39.

A-35

APPENDIX L

§17.48 Title 38— Pensions, Bonuses, and Veterans’ Relief

(d) Persons hospitalized pursuant to paragraph (c)1),, (d) or (f)

of § 17.47, who it is believed may be entitled to hospital care or

medical or surgical treatment or to reimbursement for all or part

of the cost thereof by reason of any one or more of the following:

(1)(1) Membership in a union, fraternal or other organization;

(ii) rights under a group hospitalization plan, or under any of the

prepay medical care or insurance contracts or plans which provide

for payment or reimbursement in whole or in part, for the cost of

medical or hospital care, and conditions the obligation of the

insurer to pay upon payment or incurrence of liability by the

person covered; (iii) “Workmen's Compensation” or

“employer's liability” statutes, State or Federal; and (iv) right to

maintenance and cure in admiralty; or

(2) By reason of statutory or other relationships with third

parties, including those liable for damages because of negligence

or other legal wrong;

will not be furnished hospital care, medical or surgical treatment,

without charge therefor to the extent of the amount for which

such parties, referred to in paragraph (d) (1) or (2) of this section,

are, or will become liable. Such patients will be requested to

execute an appropriate assignment as prescribed in this

paragraph. Patients who, it is believed, may be entitled to care

under any one of the plans in paragraph (d) (1) of this section, will

be requested to execute VA Form 10-2381, Power of Attorney

and Agreement. Those patients who, it is believed, may be

entitled to hospital care under the circumstances prescribed in

paragraph (d) (2) of this section will be requested to complete VA

Form 2-4763, Power of Attorney and Assignment. Notice of this

assignment will be mailed promptly to the party or parties

believed to be liable. When the amount of charges is ascertained,

bill therefor will be mailed such party or parties.

A-36

APPENDIX M

In The United States District Court

For The Northern District of Illinois

Eastern Division

No. 73-C-2424

United States of America,

Plaintiff,

vs.

Chicago White Metal Casting Company,

Defendant.

MEMORANDUM OPINION

This is an action by the United States under an assignment in

its favor and the Medical Care Recovery Act, 42 U.S.C. §2651 et

seq., to recover the reasonable value of medical services and

hospitalization rendered to Monroe Banks, a veteran of the

United States armed forces. The complaint alleges that Banks

was injured during the course of his employment with the

Chicago White Metal Casting Company. A settlement contract

entered into oy Banks and the Company in compromise of an

award rendered by an arbitrator, and approved by the Industrial

Commission of Illinois, pursuant to the Workmen’s Com-

pensation Act of that state, Ill.Rev.Stat. ch. 48, §1138.1 ef

seq., contained an award of $5,778.88 for medical expenses. !

Banks assigned to the Administrator of Veterans Affairs all his

| The settlement reads as follows:

“Respondent has offered and petitioner has agreed to accept the sum of

$18.448.88 ina LUMPSUM for 60% loss of use of the left leg, 30% loss of use,

of the right leg, plus disputed T.T. and medical (which is a compromise of the

award rendered by the Arbitrator) in full, final and complete settlement for

any and all claims of any kind, nature and description, including medical

expenses or unknown injuries which allegedly resulted from said accident.

Review under Section 1%M) is hereby specifically waived.”

A-37

rights and interest in and to the settlement award to the extent of

the aforementioned medical care. By virtue of this assignment

the defendant is alleged to be indebted to the federal geverament

in the amount of $4,787.00, the cost of the services provided by

the Veterans Administration. Jurisdiction in this court is based

upon 28 U.S.C. §1345. The matter is presently before the court

upon the defendant’s motion to dismiss and the government's

motion for summary judgment on the issue of liability.

In essence, the Medical Care Recovery Act provides that

whenever the United States is required to furnish medical and

related care to a person “injured under circumstances creating a

tort liability” in a third person, the government shall have a right

of recovery from said third party for the reasonable value of the

services so furnished. As to this right, the United States is

subrogated to any right or claim which the disabled beneficiary

has against the third person. Further, the agency or department

head concerned may require the beneficiary to assign the claim or

cause of action to which the government is subrogated.?

Prior to the enactment of this litigation, it had been the

practice of the Veterans Administration to take an assignment of

2 $ U.S.C. § 2651(a) states:

“In any case in which the United States is authorized or i

required by law t

or oe — ee ee care and treatment (esiation

rosth aah oma ay gees

—— the effective date of the ie Gee. nie ie pane ah

—_ lity upon some third person (other than oc in addition to the United

ne Se ee employers of seamen treated under the provisions of

this title) to pay damages therefor, the United States shall have

a right to recover from said third person the reasonable value of the care and

treatment so furnished or to be furnished and shall, as to this right be subro-

gated to any right or claim that the injured or diseased person, his guardian,

Pied nersae reemuative, estate, dependents, or survivors has against such

t person to the extent of the reasonable value of the care and treatment

so furnished os to be Sernished. The head of the department or agency of the

Pnited States furnishing such care or treatment may also require the injured

. a person, his guardian, personal representative, estate, dependents,

he thied en aS appropriate, to assign his claim or cause of action against

the third person to the extent of that right or claim.”

A-38

a veteran's rights to the extent of the costs of non-service-

connected medical and hospital care, furnished by the

Administration, for which third parties were, or might become,

liable. See United States v. St. Paul Mercury Indemnity Co.,

1113 F.Supp. 726, 733-34 (D.Neb. 1955), affd., 238 F.2d 594 (8th

Cir. 1956). The regulations establishing this procedure‘ are based

upon the authority of the Administrator of Veterans Affairs to

make necessary rules and regulations, 38 U.S.C. §210(c), and

to prescribe rules, procedures and limitations concerning

hospital care, id., §621.° See 1962 U.S. Code of Cong. & Adm.

News 2651.

It is unclear whether plaintiff bases its theory of recovery upon

the assignment under 38 C.F.R. §17.48(d) exclusively or in

tandem with the right of recovery conferred upon the gov-

ernment by the Medical Care Recovery Act.’ Since, in this

court’s opinion, the action may be maintained under the

assignment alone, the question whether the Act supports this suit

need not be reached.

‘ The present regulation reads in pertinent part:

“Persons hospitalized . . . who it is believed may be entitled to hospital care

or medical or surgical treatment or to reimbursement for all or part of the

cost thereof by reason of any one or more of the following:

“(iii) ‘Workmen's Compensation’ or ‘employer's liability’ statutes, State or

Federal .. .

_.. will not be furnished hospital care, medical or surgical treatment, without

charge therefor to the extent of the amount for which such parties. . . are, or

will become liable. Such patients will be requested to execute an appropriate

assignment. . . .”

38 C.F.R. § 17.48(d).

+ See note 3 supra.

‘ “The Administrator has authority to make all rules and regulations which

are necessary or appropriate to carry out the laws administered by the

Veterans’ Administration and are consistent therewith.” 38 U.S.C. § 210(c).

* “The Administrator shall prescribe—

(1) such rules and procedure governing the furnishing of hospital and

domiciliary care as he may deem proper and necessary;

(2) limitations in connection with the furnishing of hospital and domiciliary

GR csc 38 U.S.C. § 621.

’ Under the Act. however, no assignment is necessary for the United States to

institute suite.

A-39

In support of its motion to dismiss, defendant claims that (1)

benefits under the Illinois Workmen’s Compensation Act are not

assignable*, (2) no final award has been entered by the Industrial

Commission, (3) the assignment is invalid for lack of

consideration, and (4) the Administrator of Veterans Affairs has

no authority to take an assignment from a veteran for medical

and hospital care.

The Administrator of Veterans Affairs has been granted broad

statutory authority to promulgate regulations “necessary or

appropriate” to carry out the laws administered by the Veterans

Administration. 38 U.S.C., §210(c); see id. §1621. Pursuant to

that authority, the Administrator has promulgated the regula-

tion contained at 38 C.F.R. §17.48(d).° Such a regulation is

clearly within the authorization, see Higley v. Schlessman, 1292

P.2d 411, 416-17 (Okla. 1956), and therefore, valid, with the force

and effect of law. See e.g., Gowanda Coop. Savings & Loan

Ass'n. v. Gray, 183 F.2d 367 (2d Cir. 1950); Big Four Oil & Gas

Co. v. United States, 118 F.Supp. 958 (W.D. Pa. 1954). Thus, to

the extent that Illinois law purports to prohibit the assignment

in question,'° the federal regulation takes precedence under the

supremacy clause of the United States Constitution.

Defendant’s second contention is refuted by its accurate state-

ment of the rule that “a lump sum settlement contract, when. . .

approved by the Commission, has the same force and effect as an

award, and as such is a final adjudication . . ..” See Dyer v.

Industrial Comm'n, 364 Ill. 161 (1936), cert. denied, 300 U.S. 661

(1937).

* The Illinois Workmen's Compensation Act provides that “{nJo payment,

claim, award or decision under this Act shall be assignable or subject to any

lien, attachment or garnishment, or be held iiable in any way for any lien,

debt, penalty or damages.” Ill.Rev.Stat. ch. 48, § 138.21.

% See note 3 supra.

© See note 7 supra.

A-40

Finally, since the assignment is validly required by law the fact

that it may not be supported by consideration of traditional

contract principles is irrelevant.

Thus, Banks’ assignment to the United States of all ‘is rights

and interest in and to the instant award to the extent of the cost

of the aforementioned medical and hospital services is valid and

the government may properly institute a cause of action thereon.

The ability of the United States to institute an action on the

assignment on behalf of the Veterans Administration without

reference to the Medical Care Recovery Act!! is supported by

the legislative history of that statute and by the opinion of the

United States Court of Appeals for the Fifth Circuit in Pennsyl-

vania Nat'l Mutual Cas. Ins. Co. v. Barnett, 445 F.2d 573 (Sth

Cir. 1971). The Senate Report on the legislation noted, with

respect to section l(a), now codified at 42 U.S.C. §2651(a), that

“(t]he practice of securing such assignments is currently followed

by the Veterans’ Administration in its program of recovering the

costs of care and treatment.” 1962 U.S. Code of Cong. & Adm.

News 2640-41. Commenting upon the provisions eventually

codified at 42 U.S.C. §2651(c),'? the Report stated:

“It is the present policy of the Veterans’ Administration,

under broad regulatory power conferred in the Veterans’

Benefits Act to recover its cost of treating injured veterans

in negligent third-party cases where the disability is not

service connected. This language makes it clear that the

present situation is to continue . . . ” 1962 U.S. Code of

'' The assignment specifically excludes any claims which the assignor may

have based on the Medical Care Recovery Act.

'2 42 U.S.C. § 2651(c) provides:

“The provisions of this section shall not apply with respect to hospital,

medical, surgical, or dental care and treatment (including prostheses and

medical appliances) furnished by Veterans’ Administration to an eligible

veteran for a service-connected disability under the provisions of chapter

17 of Title 38.

ee

A-41

Cong. & Adm. News 2641-42.!3

Indirect support for the instant result is also found in Barnett,

supra. In that case, a workmen's compensation carrier of an

injured veteran's employer brought suit to set aside an award of

the Texas Accident Board which directed payment of workmen's

compensation benefits to Barnett, the injured veteran, and to

the United States on behalf of the Veterans Administration. A

compromise settlement was reached with Barnett, and, after

hearings, judgment was entered in favor of the government on its

claim. The court of appeals reversed the latter on a number of

grounds. Most importantly for purposes of this case, the court

noted that 38 C.F.R. §17.48(d) did not apply “in the absence of

an assignment and none was made by Barnett.” 445 F.2d at 575

The court agreed with the carrier that “any right of the Veterans

Administration to recover was conditioned upon the procure-

ment of an assignment pursuant to the regulation.” /d. at 574.

Implicit in these statements is the proposition that had the

'3 In a letter addressed to the Chairman of the House committee on the Ju-

diciary, the Administrator of Veterans Affairs made the following state-

ment.in regard to the proposed legislation:

“The Veterans’ Administration has had in effect for many years regula-

tions which provide for the taking of an assignment of the veteran's rights to

the extent of the cost of non-service-connected hospital and medical care

furnished by this agency for which third parties are, or may become liable.

These regulations rest on the Administrator's general authority to make

necessary rules and regulations (38 U.S.C. 210(c)) and his more specific

authority to prescribe rules, procedures, and limitations relating to the

furnishing of hospital and domiciliary care (38 U.s.C. 621).

“Enactment of the bill will strengthen our position in this area and insure

more uniform recognition by the courts of our right of action. We are in full

accord with the purpose of H.R. 298 and are pleased to recommend its favor-

~ ——r by the committee.” 1962 U.S. Code of Cong. & Adm.

ews '

A-42

Administration procured the assignment, recovery may have

been allowed. '¢

Accordingly, the defendant's motion to dismiss is denied and

the government's motion for summary judgment is granted.

ENTER:

eee eee. See eee eee eee eee eee er

United States District Judge

DATED: January 16, 1974

'* The court also rejected the Medical Care Recovery Act as a basis for the

cause of action, remarking that the “statute only applies in tort situations

and does not apply where the source of the claim is workmen's compensa-

tion.” 445 F.2d at 575. There seems to be some question whether 42 U.S.C.

§ 2651(a) would apply in the instant situation, compare Pennsylvania Nat'l

Mutual Cas. Ins. Co. v. Barnett, supra, and United States v. Gusto Dist. Co.,

329 F.Supp. 578 (D. Mont. 1971), with United States v. Moore, 469 F.2d 788

(3d Cir. 1972), cert. denied, 411 U.S. 905 (1973).

Aw Aneel DOAKD . steers MRS Rar fe

EMPLOYEE silenty I. Adams APPENDIX N =

111 S. Tennessee In: )104-$2 20-74-00189 |

Amarillo, Texas 79106 INDUSTRIAL ACCIDENT BOARD

WAR O5 w7s LYNDON BAINES JOHANSON HDG

P.O. Box 12757. Capito! Station

° AUSTIN, TEXAS 787'1

ak 3 ,

, Sob GHA" F

“Edwards, Smith & Associates, Attorneys MEDICAL BILLS ONLY

P. O. Box 2864

Amarillo, Texas 79105

- CC: Veterans Administration

EMPLOYER @Affiliated Foods, Inc. Attention: Richard J. Jones,

Attorney, 1400 N. Valley mills

Dr., Waco, Texas 76710

349/02 440 28 8034

CAnmien

“Texas Employers’ Insurance Association

P. 0. Box 2759

Dallas, Texas 75221

Joe Willeus

cS bh Austin, Texas

Gate of inpury \ Ava Waly wae Compensation Rate

On or About 12-20-7

On Gate of nearing after due notice to all Darives, came the above Claw tor Compensation to be

Scere, one ine Bod tneh ane evden: (Onty Fingings. Orders, ete. X's in s00renrate tastes below sop'r) —

1. Fines wnat an date of injury the emplover sustained injury in the course of employment of the emplover named show who wuss wamarlow mde ime

X_| Workmen's Compensation Act. insured with the insurance carrier named above.

2. Orders: ThecariertopeyembioyeeS ner wank for weeks for total disability beginning on

3

Orders: The carrier topsyemployeeS er wnek for . weeks (following payment of compensation,

any. due for total dusabeiity) tor % permanent ioss of - 2

4 Compensstion ordered pad under this award which has accrued trom

aeanenes —_ Gate Gability began .0 date this award is entered, less Payments siready made,

5. X | Specie Findings and Orden:

Nemed insurer is ordered to pay Veterans Admi

claimant, $1,989.85. pey ministration, an independent

© Orders The carrier to Geduct ("Om thes eweerd and to PAY to the above named ettorneyis) & lee OF the unpard portion of hw award in the amon:

” of Ihe emoun’ ordered Dad .

This ts the tat award of the Board. Any claim for additional medical. iespital. nursing. © ils medx should be made

Within © mouths from the date bills were incurred. I you ae diatiafed wath ipodattnn an d t+ giv: the Board

written netic within 20 days from the date this awar ts entered and thereafter file suit in court within days from ine receipt of notice

by the thesd. This award ox entered on the 4th _dayof__Mareh ss s97_ 5

eT Ne ANT CORR BE fea wymey frames ss meen